The town boards of Davidson 
and Mooresville will hold a joint meeting Monday, Aug. 13, at 6 p.m. to vote on the proposed purchase of the former Adelphia cable TV and internet system. The special meeting will be in the Charles Mack Citizens Center, 215 N. Main St., Mooresville.
Davidson Town Manager Leamon Brice laid out the schedule during a final public hearing on the cable deal Monday night, Aug. 6, at Davidson Town Hall.
Several dozen people attended the meeting, which at times saw a lively back-and-forth between town officials and residents over the advantages and disadvantages of the purchase.
It appears Davidson commissioners will vote in favor of the deal, based on statements at public meetings and informal conversations with board members. It’s less clear how the vote will go in Mooresville, though some Mooresville commissioners have publicly expressed support for the deal. People familiar with situation believe there’s a good chance Mooresville will approve it as well.
To do so, they would need to approve not only the purchase, but also an interlocal agreement establishing a two-town cable consortium as well as a $75 million financing plan. If they vote to go ahead, they will have 120 days to complete the purchase.
The system would be governed by a five-member board appointed by the towns – two from Davidson, two from Mooresville, and one rotating between the two towns. Cornelius, which would contribute subscribers but not join the group, would have a non-voting seat on the board, officials said Monday.
PURCHASE RIGHTS
The two towns are the two surviving members of a group that once included Huntersville, Cornelius, Troutman and Mecklenburg County.
Davidson and Mooresville are exercising their rights of first refusal to buy the system, as allowed under their contracts with the former operator, Adelphia Communications. Adelphia declared bankruptcy in 2002. Most of assets nationwide were sold in August 2006 to Time Warner Cable and Comcast, two of the biggest cable companies in the nation. Time Warner is managing the Lake Norman area system temporarily until the towns decide whether to buy it.
Cornelius officials also are expected to vote next week to transfer the town’s Adelphia cable TV customers to the consortium, which will go by the name MI-Connection. Likewise, some customers in Mecklenburg County now served by the former Adelphia system also would be transferred to the consortium.
THE RATIONALE
Altogether, about 10,200 current customers are affected by the proposed purchase, Mr. Brice said Monday night. In an introduction to the hearing, he repeated the consortium’s plans for the purchase, as well as the rationale.
Mr. Brice said owning the system would give the towns better control over customer service, pricing and spending on technology upgrades. He said MI-Connection wants to increase network speeds and introduce new services, such as telephone over cable lines, video on demand, and in new areas of town, fiber optic cable lines to the home or business.
Owning the network also could help the towns cut what they spend on their own communications services, providing better and cheaper links among departments and buildings and to regional public safety dispatching networks, he said.
Also, Mr. Brice noted that the ability to provide high-speed network lines could help attract more businesses to locate in town, which would bring in new tax revenues.
“The economic development opportunities are great,” Mr. Brice said. “We’ve been trying to … increase our commercial tax base, or industrial tax base, because residential doesn’t really pay for itself. With technology, you can get the kinds of businesses that have lots of equipment in the buildings, but fewer employees, so you have less traffic, less residential homes having to be built, things of that nature.”
MIX OF OPINIONS
Following Mr. Brice’s overview, about 15 people asked questions or offered opinions about the proposal.
Some who spoke against the purchase Monday were making repeat appearances at the hearings, including two local political candidates — Bill Jackson, a frequent critic of town government who is running for mayor, and Rodney Graham, a Davidson homebuilder who is running for town board.
But there were a few new faces among those questioning the deal.
Merle Schuh, a Davidson resident and Davidson College chemistry professor, wondered whether the towns would be able to provide the same level of service as a big cable company. “I’m still bothered by the idea that we can provide the service less expensively than a company that provides millions of customers with a comparable service, whoever that provider might ultimately be,” Mr. Schuh said. “It may cost more with the system you’re proposing.”
Mr. Schuh also asked whether many people have complained about the current service.
Mr. Brice replied that the town typically does not receive complaints directly. Since a cable-industry-backed change in state law last year, towns like Davidson no longer have any authority to hold private cable companies accountable for service or pricing complaints. “Now that the state has relieved us of any franchising authority, there is no reason (for unhappy customers) to call us, because we have no authority,” Mr. Brice said.
Chuck Renwick, a Davidson resident who said he has managed cable systems in smaller towns including Hilton Head, S.C., said he worries that Davidson and Mooresville will not be able to compete with larger players for programming.
“The reason that the cable industry has consolidated itself into essentially three major companies – Cox, Comcast and Time Warner – is because of the advantages of mass audience and mass customers. This (proposal) tends to take that in other direction,” Mr. Renwick said.
Davidson and Mooresville plan to hire a third party, Bristol Virginia Utilities, or BVU, to manage the system, Mr. Brice said. And when it comes to programming, BVU will be part of a national consortium called NCTC – National Cable Television Cooperative — which will negotation programming deals as a group, he said. NCTC is as large as the Big Three cable companies and has similar leverage over pricing, he said.
PRIVATE VS. PUBLIC
Don Harrow, who lives in River Run, said he has worked many years for an investor-owned utility, which has studied the economics of buying municipally-owned systems, on the theory that as a big company it might be more efficient. But those studies typically have shown that an investor-owned company cannot compete on price or customer service.
“I support Davidson’s moving forward on this purchase, because I believe that from a fundamental customer service perspective there is much greater commitment to customer service with local ownership, and a much greater accountability,” Mr. Harrow said.
“The notion that bigger is better or more efficient, when you really dig into it, is not necessarily the case based on the inherent differences between the structure of a public versus private (utility). In my mind, this comes down to the merits and benefit of local ownership, with local commitments and accountability. … if Davidson is a part owner of this system, you know who to go to.”
Jerry Broadway, of the Lake Norman Regional Economic Development Corp., who said his views do not necessarily represent those of his employer, said local ownership of the system could give a boost to local business recruiting.
One advantage is that the towns would have more flexibility to spend on extending optic fiber cable to businesses. “The potential (exists) to use this utility to help attract other companies to the area … Having this public ownership would give us a competitive advantage when we’re talking with companies,” Mr. Broadway said.
PREVIOUS COVERAGE
Read previous stories on the cable TV issue, as well as commentaries, on DavidsonNews.net.
ADDITIONAL INFORMATION
Town of Davidson web page with cable purchase information, including background on the deal, what a sample bill from the proposed MI-Connection would look like, and information about BVU, which the towns would hire to run the system.
Any board member that votes for this proposal should be immediately removed from office. If one penny — just one penny — of funds not directly related to the operation of the cable company is used to fund this operation, all board and planning members associated with this project should be indicted for malfeasance.
See the Huntersville Herald’s article on the Monday vote,
http://www.huntersvilleherald.com/articles/2007/08/10/news/local/local07.txt
CANDIDATES OPPOSE PURCHASE
Mayoral candidate Bill Jackson has a commentary in the Aug. 10 Mooresville Tribune outlining his opposition to the proposed cable purchase. Mr. Jackson worries that a government-owned cable system would be tempted to censor any local news program that the system produces. He also thinks officials in other area towns who pulled out of the cable deal were heeding public opinion. “I submit that the withdrawal of Huntersville, Cornelius, and Troutman from the consortium provides a big clue that there is not much public support for this venture,” Mr. Jackson writes. “As part of their due diligence efforts, I challenge the town boards of Mooresville and Davidson to hire a small polling firm to survey public opinion in those two towns.”
Meanwhile Davidson homebuilder and town board candidate Rodney Graham has penned a commentary in Sunday’s Charlotte Observer Lake Norman Neighbors section opposing the proposed cable system purchase. Mr. Graham’s commentary is paired with one advocating the purchase by a telecommunications expert named Christopher Mitchell.
See Graham’s commentary, “NO: Government should avoid business ventures”
See Mitchell’s commentary, “YES: Towns haven an opportunity to invest in our future.”
I must admit that I have not personally participated in the public forums on the cable purchase issue, but after reading the two commentaries and hearing what the mayoral candidates have to say, I now feel motivated to get involved. I think the arguments coming from the nay-sayers are reactions to the idea of “big government” and an unshakable belief in the free market. I’m not sure our town government could really qualify as “big government.” Furthermore, the cable companies’ local monopolies make things difficult for us consumers; if we are to have no choice in the matter, an element crucial to a free market, I rather rely on a group who would be accountable to us.
Mitchell is right in pointing out that a big company does not necessarily mean better service – in fact, I think it’s quite the opposite. A local company would respond more quickly to the needs of its customers. Both Adelphia and Time Warner have been terrible in their customer service. The nay-sayers are probably right in terms of bargaining power – a small retail store could not compete with Walmart among producers, but that perhaps is the point. A good comparison, as someone pointed out, would be utilities industry – and here I’m thinking the best comparison are the rural electricity cooperatives that are still vibrant and responsive to the needs of their community.
I think one of the reasons I am also in favor of local control of this part of our infrastructure is that I don’t care that much about the television side of the cable business; I want more reliable and better internet service. So the issue of competing for programming is not really an issue for me. I am much more interested in the issue of speedy and reliable internet access. This is a proper investment in our community, one not only to attract businesses but also to help prepare our children for the future. The issue is not really government vs. private company management of a utility, but non-local vs. local control. Would we want our elementary school run by a company headquartered in New York or by a school board made up of our neighbors?
The paranoia of bad government unable to run the day-to-day operations of a cable system is a red herring.
How many times must it be said that the cable operation will not be operated by government, but by a profitable, experienced, professional management company?
One more time:
1. The Town wants to own the cable system so it does not have to go through the experience of Adelphia again.
2. A cable system is a hugely profitable infrastructure and will have paid for itself many times over before it is technologically superseded.
3. Despite the fears of local Puritans, the cable system is not all about re-runs of “Sex in the City.” High speed data communications are critical for local home-and office workers. Yes, the lines carry crummy TV shows, but more importantly they bring high-speed audio-visual file transfer, real-time project interactivity, and teleconferencing. These are crucial to modern business. I am upset that many of my international colleagues have much better Internet connectivity than I do. And I think the town cares more about the local green and positive economic development aspects of cutting-edge connectivity than a mega-corporate monopoly does.
4. Since cable regulation has disappeared, we would not have the same protections from utility monopolies that we do with water, gas, and electricity. Why does anyone want to give that up?
If you believe government cannot serve the community with critical services like modern communications infrastructure, then you should move to an anarchy, because then you also believe the government can’t handle fire, police, education, roads, courts, etc. I suggest Iraq, and I’ll give you a free map.
So, if you agree that some government oversight of critical infrastructure is important, please include high-speed digital communications as critical infrastructure. The sky isn’t falling. We’re just trying to join the 21st century, and have a voice in how we do it.
If the the board and planning members of Davidson and Mooresville are so positive that a municpal owned cable TV operation will be extraordinarily profitable, then they should not be apprehensive about submiting it to a voters’ referendum. But, alas, they will not do so. Why? Because either they think you and I are so stupid or naive that we could not possibly understand the complexities of a cable TV operation or perhaps there is something else going on.
For starters Davidson and Mooresville have already misspent upwards of an estimated $750,000 (estimated because of apparent lack of town accounting tranparency) in expenses for consultants and lawyers. Such costs do not include the allocated costs of hundreds of hours of time misspent by the planning functions.
So, now Davidson and Mooresville are going to put together a multi-million dollar funding operation and practice the old accounting shell game: capitalize and amortize. They will capitalize all of these upfront costs into the funding operation and amortize them over many years. Even so, the millions planned for investment will just scratch the surface; they wil be back for more taxpayer money to fund the operation within 5 years. This fiasco will never turn a profit, at least not in my life time.
Why will it not turn a profit? First, these towns do not have the operational and financial expertise to invest in a first class telecommunications operation, not just a little old cable TV. The big boys are, to put it in vulgar vernacular, going to “eat their lunch.” The larger firms will offer a complete bundled package of wireless, internet, telephone — long distance and local, and cable TV (300 to 400 channels) with better service and total less cost.
Second, they are going to lose subscribers. The current number will dwindle by about 10% in three years. My household for one is leaving cable for satellite. So, they are going to be left with a money losing albatross which your children will have to bear.
Again, if these boards and planning folks are so certain that this cable TV operation is positive, then let’s vote on it!
I have a couple of details from last week’s cable hearing that were not included in the above story, but which seem relevant in light of comments and questions here:
Davidson has spent about $200,000 so far on due diligence and planning for the cable purchase, Town Manager Leamon Brice said in response to a question from mayoral candidate Bill Jackson, who opposes the purchase. That’s about the same as Mooresville, he said. (Mr. Jackson disputes Mr. Brice’s figures.) A portion of that will be refunded by the former Adelphia at the time the purchase closes, if the towns go ahead with the purchase. The remainder would be rolled into the purchase and paid for — as all other expenses related to running the system – by ongoing revenues from the cable system.
Mr. Brice said, “In the settlement agreement through the court system, (it says) when we close, Adelphia will pay us $475,000 which will be split among all the consortium members who had expenses. The expenses, if we buy, will be rolled into the purchase and the towns will be repaid. … If not, we will have done a lot of work for nothing.”
Officials also addressed questions about the likelihood that the proposed MI-Connection would be a drain on the towns’ current operating budgets:
Officials from the towns have noted that though cable penetration in the towns is about 35 percent – well below the national average of 65 percent – the system remains quite profitable. The business plan they’ve drafted assumes 1 percentage point annual growth in subscribership – which is below the actual growth rate in households in this region. The system is profitable at that conservative growth rate, Mr. Brice said.
More about the proposed purchase and business plan is available on the town’s website, at http://www.ci.davidson.nc.us/eventdetail.asp?scheduleitemid=1661 Some of the information is outdated. (Troutman and Cornelius is mentioned as participants, for example, although they have both dropped out since May. Cornelius appears likely to transfer its subscribers to the Davidson-Mooresville consortium if it goes ahead with the purchase.)
Mr. Brice was asked why the towns have not put the question of cable ownership to a public vote. He and town board member Evan Webster said the towns initially were given a short time frame to make a decision and did not have time to schedule a bond referendum. Mr. Brice also noted that referenda are not a common practice for municipalities in North Carolina. And Mayor Randy Kincaid ended the meeting by noting that Davidson has only once before in recent memory conducted a referendum — in 1972 when the town voted to transfer its power lines to Duke Power. “We did not have a referendum when we decided to sell our water and sewer system to CMUD … nor have we had referenda on who were going to allow in or who we were going to boot out or where we were going to put the schools or any other major decisions that we make. And that is consistent with our form of government that we have and that is a ‘little R’ republican form.”
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By the way, thanks to all for your informative and thoughtful (and civil) comments on this issue, no matter which side you’re on …
– David
A reply to Mr. Quillen:
“If the the board and planning members of Davidson and Mooresville are so positive that a municpal owned cable TV operation will be extraordinarily profitable, then they should not be apprehensive about submiting it to a voters’ referendum. But, alas, they will not do so. Why? Because either they think you and I are so stupid or naive that we could not possibly understand the complexities of a cable TV operation or perhaps there is something else going on.
Robert Maier says: Who wants to go through the expense and hassle of a referendum everytime some fringe anti-government group/individual kicks up a fuss. Most of current town board have been voted in as incumbents for ten years as a unified voice of the vast majority. Do you seriously think the majority of Town residents would suddenly go against their judgement? And what evidence do you have of that?
For starters Davidson and Mooresville have already misspent upwards of an estimated $750,000 (estimated because of apparent lack of town accounting tranparency) in expenses for consultants and lawyers. Such costs do not include the allocated costs of hundreds of hours of time misspent by the planning functions.
Robert Maier says: I think David Boraks’ numbers in another post show that yours might need to be rechecked
So, now Davidson and Mooresville are going to put together a multi-million dollar funding operation and practice the old accounting shell game: capitalize and amortize. They will capitalize all of these upfront costs into the funding operation and amortize them over many years. Even so, the millions planned for investment will just scratch the surface; they wil be back for more taxpayer money to fund the operation within 5 years. This fiasco will never turn a profit, at least not in my life time.
Robert Maier says: See above response.
Why will it not turn a profit? First, these towns do not have the operational and financial expertise to invest in a first class telecommunications operation, not just a little old cable TV. The big boys are, to put it in vulgar vernacular, going to “eat their lunch.” The larger firms will offer a complete bundled package of wireless, internet, telephone — long distance and local, and cable TV (300 to 400 channels) with better service and total less cost.
Robert Maier says: So how do you explain the success of the Virgina company that will run the system and the scores of other profitable small cable systems that have avoided being gobbled up by the “big boys.”
Second, they are going to lose subscribers. The current number will dwindle by about 10% in three years. My household for one is leaving cable for satellite. So, they are going to be left with a money losing albatross which your children will have to bear.
Robert Maier says: Enjoy watching satellite TV, and thanks for freeing up the extra bandwidth to your neighbors who depend on quality hi speed, hi bandwidth telecommunications, not Archie Bunker re-runs. Satellite is not good for Internet services. Good choice, but only for TV lovers.
Again, if these boards and planning folks are so certain that this cable TV operation is positive, then let’s vote on it!
Robert Maier says: Sure, and let’s vote on everything while we’re at it. Wouldn’t a 300 point checklist in the voting booth be fun!